Battery storage already competitive with pumped hydro, says ARENA

As Australia’s renewable energy industry awaits the imminent outcome of the South Australian government’s inaugural large-scale energy storage auction, the CFO of the Australian Renewable Energy Agency has described two of the key competing technologies – large-scale battery systems and pumped hydro – as neck and neck on pricing.

Speaking at the 2017 Large-Scale Solar Conference co-hosted by RenewEconomy and Informa in Sydney on Monday, ARENA CFO Ian Kay said projects pairing 100MW of renewable energy generation with 100MWh of energy storage were “about equal” in cost.

“If you’ve got 100MW with 100MWh, then batteries and pumped hydro are about equal,” Kay said. “But when you pair 100MW with 200MWh (of energy storage), then pumped hydro is the cheaper option,” he added.

“With all of that, together with solar thermal, where you get storage and generation, it feels to us that there will be a place in the market for those technologies,” Kay said.

This puts the South Australian battery storage tender in an interesting light, considering the Weatherill government’s recent revelation it is looking for only one hour of battery storage.

As we reported last week, the expressions of interest documents have stipulated that the SA government is is looking for 100MW/100MWh of battery storage, effectively meaning that it wants 100MW of capacity with one hour storage – although some configurations may vary.

CEFC head of large scale solar Gloria Chan says her organisation saw a proliferation of new solar projects, particularly those tied with storage – be it battery or hydro, and a combination of wind and solar and battery storage.

Chan said storage would be a key focus for CEFC and the development of future energy markets, and solar would also play a key role in providing grid stability services , using their inverters to provide FCAS (frequency and ancillary services).

Kay said that the combination wind and solar could create “synthetic baseload power”.

Battery storage costs are projected to continue their decline, and the former head of Hazelwood has already predicted that the combined cost of solar and battery storage would beat gas plants.

The comparison with storage and hydro costs in interesting in the light of the federal government’s proposed $2 billion Snowy 2.0 plan for 2GW and 175 hours of new pumped hydro storage capacity.

ARENA is looking at several different pumped hydro projects across the country, including in South Australia, saying that both battery storage and pumped hydro would be needed.

As RenewEconomy noted at the time, the haste with which the Coalition’s Snowy proposal was put together was betrayed by the fact that NSW and Victoria, the common shareholders in Snowy Hydro, didn’t know about it, and the company itself didn’t even mention pumped hydro in its Finkel submission.

But Bloomberg New Energy Finance described the plan a sign of long-term strategic thinking and planning “that has been desperately lacking in Australia’s energy policy debate for 10 years.”

BNEF said the sheer size of the project would add tremendous flexibility to the electricity system and capability to smooth the intra-seasonal variability of renewables. It was cheaper than gas and even below its projections for lithium-ion storage in 2025.

Kay told the conference this week that while ARENA considered its work done in terms of “vanilla large-scale solar projects”, managing solar and wind power intermittency using energy storage remained a major challenge for the large-scale renewables sector.

“It’s an area we’re very keen to run a number of feasibility studies,” he told the conference. “We’d be very happy to hear about them and support them.”